Economic ignoramus threatens to starve population

Venezuelan President Hugo Chavez has threatened to nationalise farms, in an effort to tackle food shortages.

Government controls keep food prices low in shops to help even the poorest Venezuelans feed themselves.

But some farmers prefer to sell their produce in
neighbouring countries where prices are higher, leading to shortages of
bread, milk, eggs and meat.

In his weekly television show, Mr Chavez said farmers doing this should have their farms "expropriated".

In other words: Because price controls have brought about shortages, Chavez plans to seize the farms so they can be run with the same socialist efficiency with which he runs the Orinoco oil sands… meaning the shortages will still persist. Brilliant.

The threat to the farmers comes a day after a threat to the bankers:

On Saturday, Mr Chavez threatened to nationalise banks which did not give enough low-interest loans to farmers.

Banks are not allowed to charge farmers interest higher than 15% – even though inflation last year ran at 22.5%.

"The bank that fails to comply must be sanctioned, and I
am not talking about a little fine," he said. "The bank that does not
comply must be seized."

Critics say complying with government policy could drive some businesses into bankruptcy.

And so the choice you face in Chavez's Venezuela comes down to this: Either comply and go bankrupt. Or defy and lose what you own… and go bankrupt.

I thought the fall of the Berlin Wall marked a permanent victory for the market economy (even if it's the mongrelized "mixed economy" of Western democracies). Chavez obviously missed the memo.

The Daily Reckoning

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About Dave Gonigam:

Dave Gonigam has been managing editor of The 5 Min. Forecast since September 2010. Before joining the research and writing team at Agora Financial in 2007, he worked for 20 years as an Emmy award-winning television news producer.